2018 MDRT International Adviser Round Table – Part 1

Riskinfo joined with Zurich and the MDRT organization to conduct an International Adviser Round Table on the sidelines of the 2018 MDRT Annual Meeting in Los Angeles at the end of June.
The outcome of our discussion about minimum adviser education standards will be of particular interest to Australian advisers, who are in the midst of debate surrounding such standards, including what transition arrangements should exist for current practitioners.

Panelists (L – R)

  • Peter Sobels – Publisher, Riskinfo, RiskinfoNZ
  • Danielle Visser – Zurich Financial Services Australia Senior Exec – Sponsor/supporter
  • Michelle Hoskin – Standards International, United Kingdom
  • Brendan Walsh – US MDRT adviser member
  • Jenny Brown – Australian MDRT Chair
  • Katrina Church – NZ MDRT Chair
  • Tristan Hartey – UK MDRT adviser member
  • Panagiotis Leledakis – Greece – Founder and CEO, IFAAcademy
  • Clay Gillespie – Canada MDRT adviser member (inset)


High-profile adviser and MDRT Australia Chair, Jenny Brown, kicked off our six-country adviser conversation by confirming new education standards for advisers in Australia have been legislated. For advisers sitting around the table, Jenny noted most of them would need to undertake further studies if they wanted to deliver advice in Australia, post the implementation of the new standards.

Debate continues to rage in Australia around which existing degree qualifications can be seen as ‘relevant’ degrees, while the nature of the examination, which all Australian advisers will be required to sit and pass by 1 January 2021, and the processes around it, continue to be debated.

Jenny said she supports the nature of the proposed adviser examination, which focusses on the Australian Corporations Act, ethics, financial advice construction and behavioural finance. “That’s not a bad thing,” she said, as she outlined the additional qualifications she would need to achieve by 1 January 2024, as well as pass the adviser exam by 1 January 2021.

Given Jenny’s existing audit and compliance commitments, which include audits four times each year with her licensee, as well as her other industry commitments and volunteer work, she told her peers there would be a massive impost of extra time (and money) she would need to find to achieve the additional qualifications that will be required of her.

The costs are certainly an issue for Jenny, if each of the eight subjects she may need to pass cost (on average) AUD$2,500 each. There are another three authorized representatives working in Jenny’s business, each of whom would need to pass a minimum of four subjects and possibly more, along with the exam – the upshot being Jenny may suddenly have an extra AUD$50,000 to find off the bottom line of her business to fund the cost of being able to continue advising her clients.

instead of raising the bar…we’ve gone way over the top

Asked why these new minimum standards and the adviser exam have been mandated, Jenny said it was because of the fallout from consumers receiving bad advice. She noted the current minimum standards required advisers in Australia to pass three subjects as stipulated by existing regulatory guidelines, which she said were hopelessly inadequate. “We all know this is rubbish,” said Jenny, referring to the existing minimum standards. “But instead of raising the bar to, say, an Advanced Diploma and an industry designation, we’ve gone way over the top.”

From the consumer perspective, Jenny shared with her peers that Australian consumers have been hurt by poor advice, examples of which have recently been highlighted by the Banking Royal Commission in Australia.

In characterizing the new standards as ‘over the top’, Jenny said those of her clients who were aware with what was happening were ‘gob-smacked’ by what those minimum standards will be. She thinks these standards for new adviser entrants to the market are reasonable, but not for existing advisers. Jenny also supports the professional year for advisers, who will be known as a Provisional Financial Adviser during their one-year internship.

New Zealand

Given what is unfolding in the Australian market, New Zealand adviser and MDRT Country Chair, Katrina Church, offered a brief but pointed statement: “I’m so glad I live in New Zealand!”. Church related to her adviser colleagues news of the legislative review that is currently under way in the New Zealand advice sector, which will update the country’s Financial Adviser Act.

She said there has historically existed a two-tiered approach in classifying financial advisers in New Zealand as either Authorised Financial Advisers (which sets higher minimum standards) or Registered Financial Advisers, for whom the minimum standards are significantly lower. She noted also that the Level 5 qualification for AFAs were required for any adviser providing personal investment advice, but for mortgage and life insurance-focused advisers, there is virtually no minimum standard that needed to be met. She said the AFA Level 5 qualification could potentially be achieved by two weeks’ full-time online study, which she indicated was not an appropriate minimum and it needed to be moved higher.

She agreed such a situation was not acceptable from the consumer perspective and supported the move in New Zealand to a single minimum standard for all advisers delivering personal financial advice.

“Our regulator tends to watch Australia,” said Katrina, “…but they usually adopt a different approach towards regulation, which is much more collaborative.”

She said the discussion in NZ at the moment centred around differentiating between product selling and delivering financial advice, noting that life insurance advice in New Zealand was deemed to be product selling rather than part of financial advice, especially when associated with bank-employed advisers, or elsewhere if the adviser only ‘sells’ one company’s product. She added that New Zealand advisers were not able to use the term ‘independent’ when describing themselves but could apply the term ‘impartial’ when appropriate.

poor advice…needs to be addressed by individual enforcement rather than higher entry levels

She also confirmed New Zealand advisers could be paid up to 200 percent of the first year’s premium for life insurance advice, but noted this does not include premium components relating to policy fees and the 15 percent New Zealand Goods and Services Tax. She acknowledged that this seems to be a lot of remuneration, but noted the low level of renewal commission, which averages around five percent in New Zealand.

Looking to the future in New Zealand, Church agreed the industry was heading in the right direction in terms of raising minimum education standards for advisers: “The discussion now is whether or not that minimum standard needs to be a degree or a higher level standard certificate,” she said, adding there would be plenty of time for advisers to be able to achieve whatever the new minimum standards will be.

Katrina’s concern, though, is that a lot of existing New Zealand advisers are waiting to see what will happen and may leave the planning of any additional studies until too late in the transition period. She fears the possible delay in some advisers getting their ducks in place to take any extra studies, combined with a proportion of the existing adviser community who may not be prepared to study to the levels that may be required, will see a lot of advisers exit the NZ advice sector.

She added that while higher standards are needed, it still won’t eliminate poor advice, which she believes needs to be addressed by individual enforcement rather than higher entry levels.

Katrina also voiced a concern about regulatory reform proposals that currently propose to distinguish between product advice and financial advice. She believes there should be no delineation between the two, and that, in order to recommend the right product to a client, the adviser must, by definition, be delivering financial advice. “You will have people that will peddle product, but if you’re doing your job properly, you are definitely giving advice and the concern we have at present is how that is actually understood by the regulator.” She said if she was giving product advice to the 80 percent of her clients who are small business clients, she said this would involve providing full financial advice.

United States

Switching to Brendan Walsh for the US perspective, he told his peers that listening to the conversation so far it made him feel as if he was in the Wild, Wild West when it comes to minimum education standards and regulation of financial advice: “In the US path to entry to advise on life insurance, you have to be licensed, which means you have to pass the Life and Health exam. So, if you pass that test, which is really a course, you then license yourself with the insurers and that will allow you to sell any fixed-base life insurance products, including term insurance, whole life and universal life insurance products. You just can’t sell securities-based life insurance or annuities, which require other qualifications (Series 6). Then if you pass our regulatory version of the securities exam, you can advise on mutual funds, variable life and variable annuities. If you pass ‘Series 7’, you can discuss individual stocks and bonds.”

Brendan said passing the Series 6 and 7 qualifications was much more difficult than the qualification standards needed to advise on life insurance products because of the perception that the mutual funds, variable annuities, stocks and bonds are more complex products to discuss with clients.

He said a proportion of US advisers choose not to take the more difficult exams and to focus only on life insurance. “But then they can’t really talk about everything.” He said if you’re an adviser who only advises on life and health in the US, “…you’re just a salesperson. You’re not an adviser because you’re hamstrung on what you can advise on.”

Brendan’s sense was there was not a lot of advice impropriety taking place in the life insurance industry. “I think you see it more in the annuity business within the US,” he noted, and also made the observation that “…if you’re doing the right thing for your client and you’re looking at that whole picture, suitability and compliance requirements are easy to meet.”

if you’re doing the right thing for your client and you’re looking at that whole picture, suitability and compliance requirements are easy to meet

His summary comparison of requirements for US advisers, particularly in relation to the minimum education standards being implemented in Australia and New Zealand was: So, we don’t have any requirements around exams, as you can see.”

In terms of impending reform, Brendan referenced the Department of Labor reform proposals introduced by the Obama administration, which would require the adviser to be subject to a fiduciary best interests duty for advice to clients with retirement accounts, but which the Trump administration decided against implementing.

Brendan summarised the minimum education standards required for US advisers as consisting of: licensing, testing and continuing education, but no degree or equivalent requirements.

He also clarified that continuing education required 24 hours over two years, which the rest of the panel considered generously low.


When Panagiotis (Panos) Leledakis entered the advice sector in Greece, he told his peers there were no entry requirements for advisers other than a high school certificate.

However, a 600-question multiple choice examination was introduced in 2012, which new entrants into the Greek financial advice industry were required to sit and pass. However, this exam was not required to be passed by existing advisers, and was “…very easy to pass,” according to Panos.

education regulations are now under review for all advisers operating across the European Union

He added that education regulations are now under review for all advisers operating across the European Union under an Insurance Distribution Directive (IDD) mandate.

According to pwc, The IDD is a new EU wide directive aimed at ensuring minimum harmonisation of insurance distribution regulation across the EU, creating a ‘level playing field’ for insurance intermediaries and insurance distribution, regardless of the channel customers use to purchase their products. The aim is to ensure consistent prudential standards for intermediaries as well as significantly raising conduct standards, improving consumer protection and effective competition. 

The IDD applies to insurers, insurance intermediaries, price comparison websites/aggregators and ancillary insurance intermediaries. The conduct requirements applying to distributors (which includes insurers) vary according to the nature of the business, customers (including commercial clients) and distribution channel used.

The panel compared notes on minimum CPD hours required in their respective countries after Panos addressed the topic initially raised by Brendan:

Greece 15 hours per annum
USA 24 hours every two years (average 12 hours per annum)
New Zealand 50 hours per annum
Australia 30 – 50 hours per annum, depending on nature of advice and designations
United Kingdom 35 hours
Canada 60 hours over two years for securities-related advice (average 30 hours per annum)


Panos and the rest of the panel agreed with Katrina, however, that the continuing learning all advisers appear to be required to undertake is more so for the regulator to tick a box, rather than inspire advisers to become better than they are today.

Panos said new European regulations required advisers to prove they have conducted a needs analysis and have their clients confirm that they have received that advice: “But they didn’t give a pattern,” he said. “You can do whatever you want and if they check you, you have to prove that you gave advice.”

He added this was a minimum requirement for every adviser in the European Union, but that individual country’s regulators could apply additional requirements.

Asked whether he felt these minimum requirements were acceptable from the consumer perspective, Panos said they were not.

Responding to a question from Katrina, Panos said that only a small percentage of the Greek adult population received financial advice: “It’s very low and … many advisers are not acting as advisers. They are [product] salesman and unfortunately they just sell whatever is in the fashion.”

United Kingdom

Turning to the United Kingdom, adviser and business co-owner, Tristan Hartey, metaphorically fell on his sword by observing:

“I suppose in the UK, we’re partially to blame for everything because we’re the first country, really (in terms of re-regulating the global financial advice markets).”

“Well, we were the first country to really go down this route. I’ve only ever known the being fully regulated, fully qualified route. The majority of UK advisers used to effectively just be salespeople. They would go out, sell a product, and then five years later they would resell the same product with a different company and they just got rotated around and there was a lot of bad advice going on.

But things are very different in the UK today. While degrees are not required of new or existing advisers, Tristan said the UK required a minimum diploma that could be complemented by additional industry qualifications.

The interesting thing that happened with our regulation is it shrunk our industry hugely and actually it made advice unaffordable for many people

Placing education to one side, Tristan focused on a tight compliance regime that now exists in the UK: “We have a very onerous system of fact finding, having to do multiple forms which constantly have to be signed. I’ve just had another one which is just a pain in the **** which is a GDPR (General Data Protection Regulation). “If you mention those four letters to anyone from the European Union, their face will do exactly what yours just did,” he said to Katrina!

Tristan shared that GDPR requires advisers “…to pretty much delete any data you had on anyone. It isn’t an opt out. They have to opt in,” he said. “So, say if they haven’t signed it [opted in] and they’re already a client, you have to delete it.”

Tristan also pointed to an anomaly in which the UK regulator, the Financial Conduct Authority, requires advisers to retain client data for a minimum period:

“Our regulator requires us to keep everything for five years. Technically, by doing that, and the client doesn’t respond [opt in under GDPR], we’re breaching something,” he said.

In what is clearly a messy regulatory tangle for the United Kingdom in leaving the European Union shortly, which may lead to further regulatory change (or change back), Tristan offered a sobering observation: “The interesting thing that happened with our regulation is it shrunk our industry hugely and actually it made advice unaffordable for many people.”

Tristan added that because of the impact of regulatory reform, UK banks no longer offer financial advice to their customers in a country where registered adviser numbers have reduced to around 22,000 in 2018, down from around 300,000 in 2012, prior to the implementation of the UK’s Retail Distribution Review reforms.

Summarising the education requirements for UK advisers, Tristan said investment advice required the diploma he referred to but, as long as advisers could access professional indemnity cover, there were no other qualifications (no diplomas) required to deliver life insurance advice.


In providing some background to adviser education in his country, Canadian adviser, Clay Gillespie, told the panel that 70 percent of wealth funds under management in his country is owned by six Canadian banks. Noting a complicating factor in Canada’s heavily-regulated financial services environment, Clay said there exists an Insurance Act, under which insurance companies are regulated and a separate Securities Act, where mutual funds and securities are regulated. In addition to the separate Acts, Clay also referred to The British North America Act, where “…the securities and insurance industries are regulated by our provinces, not the federal government.”

Asked whether provincial oversight of securities and insurance was a good thing, Clay’s relatively conclusive response was:

“No. Of course, not, because you’re trying to get ten provinces and three territories to agree on stuff.”

[In a rare editorial moment, Riskinfo agrees with Clay’s assessment that it’s probably quite a challenge to get ten provinces and three territories anywhere in the world to agree on anything that involves any kind of bureaucracy…]

Clay said there are no degrees or designations required to be a financial adviser in Canada, but there were exams: “You have qualification exams in the insurance world. Then they have it in the mutual fund world and then they have it in the securities world,” he said, clarifying that all of these exams are different and specific to the area of product/advice.

Asked whether different exams across three different sectors was a good thing, Clay’s relatively conclusive response was:

“Oh no. Our education system sucks.”

There are people in our industry that shouldn’t be in the industry

In a sobering assessment, Clay continued, “There are people in our industry that shouldn’t be in the industry. My humble opinion why this is so in Canada is because they want, when you go up to the bank teller, to be able to buy a product at the bank.

This was an important point, as Katrina agreed, stating: “That’s exactly how it is in New Zealand, at the banks.”

Clay said each sector (insurance, securities, mutual funds) operated in their own silos and each was working to increase their minimum education requirements.

He said the only debate in Canada at the moment is whether client best interests can co-exist with ‘embedded commissions’ (i.e. commissions paid to the adviser by the carrier; not the client). “And the authorities said, no, we’re still going to allow embedded commissions.”

Clay said he didn’t think Canada would ever adopt a national standard because a few of its provinces, especially Quebec, have indicated they will never consent.

He then moved the conversation to the issue of public advice scandals, or the lack of them, in Canada. While he acknowledged Canada was behind countries such as the UK and Australia when it came to setting higher minimum education standards, Clay made the point that Canada has not had an adverse public advice scandal:

“The difference that we’ve had versus Australia, … and the UK is that we’ve never had a massive, negative event that forces the regulator to go and change things.”

Clay believes “…you should have a planning designation, a degree of some type, to give advice… I think there should be an exam that everybody has to pass which is rigorous…so if you’re an existing adviser and you can’t pass, well you’re probably not giving good advice.”

Focussing on updating existing adviser education standards, Clay added: “I’m fine [with] everybody having to write some huge exam that’s very complicated, [but] whether they have to go back and do a degree I think would be pointless.”

What Clay sees as a concern is the Canadian silo system under which a risk adviser or a mutual fund salesperson or a stockbroker may find it expedient to try to solve their clients’ issues only through product solutions available to them in their own area of qualification, or silo, which he says is clearly detrimental to the best interests of the consumer.

Part II of our 2018 MDRT International Adviser Round Table, sponsored by Zurich, will be released shortly, in which our panel of advisers will deliver a thumbs-up to the minimum education standards about to hit the Australian regulatory environment, at least from the consumer perspective, and where other global educational and qualification standards and perspectives will be debated…

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